How is Samsung hurting Apple

Samsung Electronics regained the lead in smartphones from Apple in the first quarter of this year. One of its weapons: screens of many different sizes. 

Samsung sells at least 13 smartphones with screens ranging from 2.8 inches on the Replenish to 5.3 inches on the Galaxy Note. Apple, which has always believed in a limited number of models, offers only a 3.5-inch display on its two iPhones. Suwon, South Korea-based Samsung is testing the tablet market as well with a similar plan. 

The different strategies -- and the success of Samsung's -- has led analysts including London-based Neil Mawston at Strategy Analytics to speculate that Apple will have to expand its line at some point. Samsung also ended the 14-year reign of Nokia as the world's biggest maker of all kinds of phones in the last quarter. 

"Samsung has long had a buckshot strategy for its mobile and portable hardware," Mawston said. "Samsung fires out dozens of new models at high speed every year and hopes that one or more will eventually stick." 

The maker of the Galaxy range of phones sold 93.5 million handsets in the first quarter, 36 per cent more than a year earlier, Strategy Analytics said April 27. Nokia shipped 82.7 million, down 24 per cent, and Apple sold 35.1 million units, an 89 per cent increase from last year. 

Samsung sold 44.5 million smartphones in the three months ended in March, regaining the lead from Apple, according to the researcher's data. Smartphones let users watch video, send e- mails, play games and surf the Web. 

Product breadth 
Size is an important reason in choosing mobile devices after Google's free Android software became the biggest challenger to Apple's iOS in the $219 billion global smartphone market. 

"What we're seeing here is, really, Samsung gaining share because of product breadth," said Mark Newman, a Hong Kong- based analyst for Sanford C Bernstein & Co. "They have all different price range for all different people." 

Samsung plans to unveil a successor to the Galaxy S II in London today. 

Last week, Asia's biggest consumer-electronics maker said first-quarter profit jumped 81 per cent to 5.05 trillion won ($4.5 billion) after earnings at the mobile business almost tripled. Chinese demand for the iPhone helped Apple boost its fiscal second-quarter profit 94 per cent. 

Samsung shares have gained 33 per cent this year in Seoul trading, while Apple has surged about 44 per cent in New York. 

Hybrid phone-tablet 
Critical to the surge in profit at Samsung was the Galaxy Note, a hybrid between a phone and tablet computer equipped with a stylus to manipulate programs, photographs and text on its screen. Since Note's debut in October, Samsung sold more than 5 million of them. 

Samsung said it expects to sell 10 million units by the end of this year and plans to introduce more pen-equipped products with different screen sizes. 

"Screen size seems to be far more important than we originally anticipated," Daniel Kim, a Seoul-based analyst at Macquarie Group, said in a March 28 report. "Once consumers are used to larger screens, few go back to screens smaller than four inches." 

Samsung counts Apple as its biggest client -- Apple accounted for 7.64 percent of Samsung's revenue, buying chips and displays, according to data compiled by Bloomberg -- even as the two companies have sued each other across four continents, with Apple accusing Samsung of "slavishly copying" its products. 

Natalie Kerris, a spokeswoman for Apple, declined to comment. 

'Market's needs' 
"Our smartphone displays are designed to maximize the strengths of each device and reflect the market's needs," Chris Jung, a Seoul-based spokesman for Samsung, said in an e-mail. 

The multisize screen approach isn't playing out in the tablet market, where Apple dominated with 62 per cent of the market as of December 31, compared with Samsung's 9 per cent, according to estimates by IHS. 

Unlike its strategy for the iPod music players -- where Apple brought out the Nano, the Mini and the Shuffle after the original was introduced in 2001 -- the Cupertino, California- based company has followed a one-size display for its phones and tablets. 

iPhone, iPad 
The iPhone, which debuted in 2007, featured the same 3.5- inch display screen as the latest iPhone 4S model, even as the resolution improved. Similarly, the iPad tablet computer has sported a 9.7-inch screen since then-Chief Executive Officer Steve Jobs unveiled it in 2010, while the display quality subsequently sharpened. 

In contrast, Samsung's first Galaxy Tab tablet device was introduced in 2010 with a 7.7-inch screen, while Waterloo, Ontario-based Research In Motion Ltd unveiled its PlayBook with a 7-inch display. 

In addition to the 7.7-inch model, Samsung sells the Galaxy in the US with displays of 7 inches, 8.9 inches and 10.1 inches. 

Jobs said in October 2010 that RIM would struggle to attract application developers to support its BlackBerry smartphone and that devices like its PlayBook tablet are "dead on arrival" because they're too small to compete with the iPad. 

Size speculation 
Speculation has persisted that Apple will add different screen sizes. The Maeil Business Newspaper reported in March the iPhone 5 will have a 4.6-inch display, while the Chinese online portal Netease reported last month that Apple is planning to introduce a smaller iPad. 

Still, "Apple could play the 'if it's not broke, don't fix it' card," said Ramon Llamas, an analyst at IDC in Framingham, Massachusetts. 

While Samsung has taken the market-share lead in unit sales, Apple still garners most of the industry's operating profits, wrote Michael Walkley, an analyst at Canaccord Genuity, in a May 1 note. Apple accounted for 73 per cent of all handset- industry profits in the first quarter, he estimated, and Samsung generated 26 per cent, giving the duo 99 per cent of the total. 

One of the foundations of Apple's success has been its focus on developing a single iconic product with mass appeal, rather than seek market share by having a broad portfolio of products, said Brian Marshall, an equity analyst with International Strategy & Investments, in San Francisco. 

Given the fast growth in tablets and phones and Apple's relatively low market share in the latter, the company doesn't need to expand its form factors for now, Marshall said. As the markets get more saturated, the pressure will be much stronger to add more screen sizes. 

"Today, the answer is no," he said. "Down the road, the answer is yes," he said. 

Mawston at Strategy Analytics agrees. 

"Apple will need different screen sizes if it decides to launch new models for lower-cost segments in the future," he said.